What are the Problems and Possibilities of Economic Monetary Union?
What are the Problems and Possibilities of Economic Monetary Union? European Monetary Union (EMU) was first introduced in 1969 at a summit of the European Economic Community in The Hague, the members arranged to endeavour and reduce the fluctuations in their currencies in order to coordinate national policies. 1 (McCormick). Jacques Delores, in 1989 as the president of the Commission decided to introduce a 3 stage plan designed to increase the movement towards EMU, the plan attempts to fix exchange rates and introduce a single currency, the Euro. This plan was not completed until 2002 when the Euro coins and notes began circulating. In order for members of the European Union to join the Euro they were subject to convergence criteria, which confined the levels of government debt and national debt, inflation rates, exchange rates and interest rates the member country is allowed to have. Converging to these criteria and adopting the Euro has provided many different outcomes, some of which are negative and other which will benefit the economies of the member countries. This essay shall examine the problems and possibilities of European Monetary Union in order to determine whether EMU is beneficial to all that have taken part, and to discover where Economic Monetary Union is headed. In order to be part of the Economic Monetary Union, the member countries adopted the Euro
vietnam on the way to become a market economy
Vietnam and its non-market economy Eleven years ago, Vietnam started a long journey to World Trade Organization. United States, the main obstacle on the progress to negotiate for Vietnam to join WTO, became the last country to sign the bilateral trade agreement (BTA) with Vietnam in 2001. According to the multilateral commitments, Vietnam will be designated as a 'non-market economy' (NME) for a period of 12 years after its accession to the WTO, not later than 31/12/2018, or until it is able to meet the economic criteria for a " market economy" (ME) designation. It seems unfair that Vietnam is classed as a non-market economy after twenty years of reform. This in effect makes it difficult for Vietnam to defend itself from anti-dumping allegations lodged by the EU and the US. But why does this happen to Vietnam even though it has tried a lot? Let see the six factors which determine Vietnam's economy a NME or ME: • Currency convertibility • Wages are determined freely • Joint ventures and business investments by foreign companies in Vietnam • Government ownership • Government price controls and allocation of resources • Other fators deemed appropriate. And hereby is the reasons for Vietnam's designation as a NME according to Ministry of Commerce of The United States. It said that Vietnam's economy is still on the way to reform and has not really met the
Asset Markets & The IS-LM Model.
Topic 5 - Asset Markets & The IS-LM Model / Introduction In this note, we are going to provide a link between asset prices and the demand side of the economy. We will consider asset markets such as the stock market or house/ real estate markets and how the impact on aggregate demand. We will emphasize that agents are forward looking in terms of consumption and investment decisions which allows this link to be made. In addition, if the government is funding spending through running a fiscal deficit, then the funding of this deficit will have implications for AD. If the government is running a deficit, it can fund this by either * Issuing bonds * Expanding the nominal money stock i.e. where Dt is the fiscal deficit at time t Gt is government spending at time t Tt is tax revenue at time t Bt is the stock of bonds. Therefore ?Bt is the change in the stock of bonds between t and t-1. Mst is the nominal money stock Thus, if the public finances are initially in balance (i.e. Gt = Tt) and the government increases spending by £100m then it requires to finance this deficit and can do so in 2 ways Increase the stock of bonds by ?Bt Increase the nominal money stock by ?Mst Note. If the increase in spending is permanent the state will require to find £100m each and every year. This implies either or both A rising debt-GDP ratio A rising nominal money stock Note. If the
Should the Uk Join EMU
SHOULD THE UK JOIN EMU? Introduction Many on the continent relish the opportunity of pooling the power of Europe in order to stand up to the US who has for so long used its weight to secure its position as the only superpower. Some in Europe fear that left as individual nations, Germany would emerge by far the strongest in Europe and would eventually dominate the continent. These feelings are behind the creation of the EU and the Euro. This report is split into 4 chapters. The first chapter deals with the supposed benefits of a single currency in Europe. Chapter two is a critical analysis of Robert Mundell's theory of Optimum Currency Areas. This is the most widely accepted theory on how to test the viability of a currency area. In chapter 3 we take a closer look at the UK, specifically the five tests that Gordon Brown 'insists' must be met before the UK can join EMU. Finally we take a look at some other factors that may affect whether or not the UK should join EMU. CHAPTER 1 The Benefits of EMU According to the European Commission there are four main benefits of a single currency. : Cost savings on cross-border transactions 2: Increased price transparency, which benefits the consumer. 3: More stable prices due to the anti-inflationary ECB 4: Elimination of exchange rate instability and uncertainty within EMU is only really significant for Northern Ireland
PAKISTAN SOCIETY OF DEVELOPMENT ECONOMISTS
PAKISTAN SOCIETY OF DEVELOPMENT ECONOMISTS FOREIGN DIRECT INVESTMENT, EXPORTS AND DOMESTIC OUTPUT IN PAKISTAN MOHSIN HASNAIN AHMAD Project Economist SHAISTA ALAM Project Economist And MOHAMMAD SABIHUDDIN BUTT SRE/Associate Professor Applied Economics Research Centre University of Karachi Karachi-75270, Pakistan NITNETEEN ANNUAL GENERAL MEETING January 13-15, 2004 PIDE, Quaid-e-Azam University Campus Islamabad FOREIGN DIERCT INVESTMENT, EXPORTS AND DOMESTIC OUTPUT IN PAKISTAN MOHSIN HASNAIN AHMAD, SHAISTA ALAM and MOHAMMAD SABIHUDDIN BUTT ABSTRACT Most empirical work on the effects of outward-oriented policies in developing countries has identified openness with trade.However; openness involves much more than just trade. This paper analysis the relationship among foreign direct investment, trade and domestic output by employing Granger non-causality recently developed by Toda and Yamamota over the period 1972 to 2001.The results show the long run relationship among the variables. The results support the export-led growth hypothesis. The finding indicates that FDI-domestic output nexus. This suggests that domestic firms through spillover effect mechanism have got benefit from FDI.The findings do not show FDI-export growth nexus. The results indicate that the integration of the Pakistan economy with the world economy should be enhanced with the policies
US FINANCIAL CRISIS, ITS IMPACT ON INDIA AND GOVERNMENT INITIATIVES
BUSINESS ENVIRONMENT ASSIGNMENT US FINANCIAL CRISIS, ITS IMPACT ON INDIA AND GOVERNMENT INITIATIVES 2/19/2008 TABLE OF CONTENTS SR. NO. TOPIC PAGE NO. Executive Summary 3 2 Introduction 4 3 Impact of crisis on India 6 4 Measure taken by Government 0 5 Impact of measure taken on economy 2 6 Future implications 5 7 Conclusion 7 8 Glossary 8 9 Bibliography 20 EXECUTIVE SUMMARY The combined impact of the reversal of portfolio equity flows, the reduced availability of international capital both debt and equity, the perceived increase in the price of equity with lower equity valuations, and pressure on the exchange rate, growth in the Indian corporate sector is feeling some impact of the global financial turmoil. The monetary and fiscal package given by the Government and The RBI has given stimulus to maintain growth On the other hand, on a macro basis, with external savings utilisation having been low traditionally, between one to two percent of GDP, and the sustained high domestic savings rate, this impact can be expected to be at the margin. Moreover, the continued buoyancy of foreign direct investment suggests that confidence in Indian growth prospects remains healthy. INTRODUCTION The economy of each and every nation, whether big or small is facing the turmoil. Asia and Europe being most closely linked with US have faced the direct heat due
Discuss, in the light of the economic changes that have occurred within the UK in recent years, whether it is still correct to describe the UK economy as a mixed economy.
Essay B; Discuss, in the light of the economic changes that have occurred within the UK in recent years, whether it is still correct to describe the UK economy as a mixed economy. In the real world it is fairly easy to assess how 'mixed' an economy is. Economists simply look at the percentage of a country's Gross Domestic Product (GDP) that is devoted to government spending and also by looking at how much tax is devoted to the nationalised industries. Currently, the UK devotes about 40% of its GDP to government spending. That extra 10% means that the health service is more comprehensive, as is the welfare state, although it can be argued that both are in decline. The first because the demand for health care grows much faster than the average growth rate of the economy, partly due to the need to introduce new technology as it is invented. The second because of the huge increase in claimants (the unemployed, for example) plus the increase in the number of pensioners relative to those in work. Though, previously during the 1970's and early 1980's, the GDP, which was devoted to government spending, was much higher. This was until Privatisation occurred, when the Conservative governments under Maggie Thatcher developed the policy of Privatisation. Privatisation means the transfer of economic activity from the public sector to the private sector. The Financial secretary of
How clear is the distinction between voluntary and involuntary unemployment?
How clear is the distinction between voluntary and involuntary unemployment? How clear is the distinction between voluntary and involuntary unemployment? What might lead to an decrease in voluntary unemployment? Economists divide unemployment into five broad categories: frictional unemployment; structural unemployment; technological unemployment; classical unemployment; and demand deficient unemployment. An examination of each of these categories will show that some are more likely than others to be made up of workers who could work and do consider themselves part of the labour force, but nevertheless choose, for whatever reason, to remain unemployed. Others will be unlikely to contain the voluntarily unemployed, but will be made up of those who are unable to find work. Having examined these categories, we will proceed to draw up two models of unemployment which show clearly the distinction between voluntary and involuntary unemployment, and then go on to consider how voluntary unemployment might be reduced. Frictional employment is caused by short run changes in the economy, which result in workers moving from one job to another. This transition will generally take time. If someone is made redundant it may be some time before they find another job which is vacant, and it is quite likely that they will not take the first job they come across but will search for one
Russia vs Brazil, A Macroeconomic Comparison
Macroeconomic objectives as we know them in theory were not all born on any given day in history. Instead, through various paradigm shifts, trial and errors of economic systems and policies, as well as an entire era of industrialisation and hardships of development that occurred as a result of it, brought about the notion of 'desired' macroeconomic indicators as we know them today. I refer to full employment, steadily (and by a small year on year percentage) rising inflation, and healthy economic growth. These are to be brought about by responsible fiscal policies (taxation, government spending) and well thought out ('market aware') monetary policy (central bank's setting of the interest rates).1 Since Adam Smith's Wealth of Nations (1776), there was an entire movement/paradigm that advocated market mechanisms and free trade. This was driven in Britain, some parts of Western Europe, and certainly in the USA, by the protestant work ethic. Profit was no longer a taboo in the 19th century. This is arguably what led to such a strong wave of industrialisation in these countries. However, amongst other reasons, the mistreatment of employees by firms, and harsh working conditions, as well as a widening gap between the rich and the poor (specifically the employer and the employee) gave rise socialist ideologies and the famous 'labour theory of income.' The former Soviet Union
Economic and Monetary Union.
ECONOMIC AND MONETARY UNION For many, the launch of euro bank notes and coins in 2002 will symbolise the greatest achievement in post war European integration since the Treaty of Rome. For others it represents a premature step on the road to closer co-operation. This analysis will approach the contentious issue of Economic and Monetary Union by drawing upon two related themes: adjustment and co-ordination. The first will be situated within the debate surrounding the pros and cons of EMU participation. The second will consider the actual operation of EMU and the policy architecture, which governs its behaviour. The investigation will conclude with a brief introduction to the debate surrounding the UK's involvement with Economic and Monetary Union. But first there will be a short consideration of the political issues relating to EMU. THE POLITICS ECONOMY OF EMU As is usual in the case of the EU it can be argued that EMU is an economic means to a political end, increasing political integration. EMU had its political roots in the problems of the EMS, principally that for a stable system other Member States had to adjust their economic policy to conform to Bundesbank monetary policy. It came to be seen that a share of pooled sovereignty over monetary policy, was better than a largely illusory national sovereignty. This was particularly the case since increasingly